Psych4Marketers: 3 Techniques to Better Understand Consumer Behavior

The realm of marketing is, at the most basic level, about figuring people out. Doing so certainly involves understanding and analyzing individual differences between consumers (a topic we have focused on before), but marketing and advertising has deep roots in capitalizing on some predictable facets of consumer behavior. Here, we will look at three of these “tried and true” techniques from the perspective of psychology to better understand the rationale behind them.
1. Anchor Pricings
Anchoring, at its most basic level, is when a number in our heads influences how much we are willing to pay for a good or service. When Apple first introduced the iPhone, they priced the 8GB model at $599. Many eager consumers bought the device at this price, but were dismayed when the price dropped to $399 less than three months later. Even though this created an uproar among the early adopters, the move was a smart one: compared to the original price, this new one seemed like a grand bargain. Apple had successfully ‘told’ their customers what an acceptable price for an iPhone was when they first released the product; they had anchored this price in their customers’ brains. Since this was the only price consumers had to compare later versions and releases to, anything less would seem reasonable. Anchoring is easiest when, like the iPhone, the product is one-of-a-kind in its market, as consumers have no other product prices to compare. When consumers don’t know what price they should be paying, they are forced to take the price being given to them, trusting it is The Price for that product. This eventually becomes the anchor price for products of that type, the price to which they compare other similar products. For this reason, as Dan Ariely points out in his blog post, the original price of a product can have enduring effects.
However, anchor numbers can be completely arbitrary (i.e. not related to prices of products), and still have effects. For example, when people are asked to write down the last two digits of their social security number (SSN) and then bid on items, those with higher SSNs ended up bidding higher than those with lower ones (Ariely 2003). So why are we so influenced by numbers? Aren’t we supposed to be rational thinkers, capable of analyzing the characteristics of new products to see if they’re worth the sticker price? Well yes, but our amazing computive brain operates by making comparisons. Think about how hard it is to not compare people, places or things that you know to others! Whether we want it to be or not, our brain is constantly being groomed and primed to be able to better predict what will happen in the world around us, in order that it may respond correctly. This is great when, in our ancestry, we were trying to make correlations between certain noises and predators, but this mechanism now makes us susceptible to the coercion of marketers who essentially make these correlations for us!

2. Gaga for Goo Goo: Babies and Anthropomorphizing in Advertising
Earlier this year, Evian’s Baby and Me television ad went viral within days. If you haven’t seen it, it’s essentially a minute of adorable dancing babies. As a quick Google search will show you, there is no dearth of other examples of infants in advertisements, and they do the trick: it’s hard not to be seduced by cute chubby cheeks and big baby eyes! But why?
You’ve probably heard it before, and it seems excruciatingly obvious, but humans are social beings. Being social and connecting to others makes [most of] us happy. From an evolutionary perspective, this makes sense, as we often must depend on each other and must also care for our offspring. In evolutionary biology, scientists use the term proximate cause to refer to the mechanism directly responsible for an outcome whereas the ultimate cause is the higher-level reason why something happens. For example, we can say humans are ultimately attracted to children and babies because we have to take care of them so our species continues. But on a proximate level, this phenomenon is governed by our biology: our brains and hormones are essentially hard-wired to respond positively to children. Even though the children in advertisements are not our own, our brains still react.
Babies may be one of the most powerful images in advertising, but humans are actually primed to respond to anything that looks remotely humanoid. To see what I mean, take a look at this post on BuzzFeed. Also a result of our social brain, we are inclined to anthropomorphize anything we can. Once we see it as more similar to us, we feel connected to it and thus want it (if it’s a product) or want whatever it is associated with. Of course, this reasoning is not happening consciously and thus the effect can work even when the cues are very subtle.
3. Temporal Discounting
Temporal discounting refers to the human tendency to discount the value of good received in the future versus good received now. For example, given the choice between receiving $20 today or $30 in three weeks, many people would choose $20 today, since the additional time spent waiting for the extra money counts against its face value. As the old adage goes, “A bird in the hand is worth two in the bush.” That is, you’re better off with a certain current advantage than an uncertain (albeit it potentially greater) future advantage. In a world where we live very much ‘in the now’ thanks to all sorts of technology, the desire to have things immediately is especially increased. This is helpful when sellers are trying to market a product that their customers will use right now, but what about when they’re trying to sell a product that consumers could benefit from down the road? Because of our tendency to temporally discount values, this causes a problem. An individuals’ hesitation to save for retirement or buy insurance is often cited as an example of this. Despite the plethora of reasons why saving is a good idea, some people tend to think, “Why lock money up for the future (where it essentially is worth less) when I can have it to spend it now?”
So, what drives this seemingly impulsive line of thinking and how can it be bypassed? Two research findings help answer this question: first, temporal discounting decreases as the future reward gets larger. Given a choice between $10 now or $15 in two weeks, most people choose now. BUT given the choice between $10 now or $1,500 in two weeks, people are more inclined to wait. This tells us that temporal discounting in terms of monetary values is not done in a strictly linear fashion, and by emphasizing enormous gains in the future, one might be able to get around the human inclination to discount values. The second finding is that the rate of temporal discounting is correlated with individuals’ perception of their future self. A 2009 study by Hershfield et al. found that the more one thinks their future self will be like their present self, the less they are inclined to temporally discount. This makes sense - if you thought you would be very different in the future, why would you want to purchase a good today for that future self? Sellers and marketers can put this psychological insight to use by invoking feelings of self-continuity. Showing consumers they will be the same person or have the same values and needs in the future as they do now will make them more inclined to invest in a future purpose today.
Now you should have a better idea of figuring people out when the roots of marketing and advertising are involved. From a psychology perspective, there are three “tried and true” techniques that help further understand the individual differences between consumers, which you just read about. Anchor pricing influences how much we are willing to pay for a good or service, humans are actually primed to respond to anything that looks remotely humanoid, and temporal discounting is correlated with individuals’ perception of their future self and decreases as the future reward gets larger.


Continue reading our Psych4Marketers series!

Consumer Behavior pricing Buying Behavior Psychology and Marketing Advertising and Psychology Purchasing Behavior

Posted by Madeline Ford on Jun 5, 2013

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